PPL’s 70m shares disinvestment fetches Rs15.3b

ISLAMABAD - The government has successfully disinvested the 70 million shares of Pakistan Petroleum Limited (PPL) to international and domestic institutional investors and High Net Worth individuals that would generate Rs 15.3 billion for the national kitty.

“This is the first time in history of Pakistan that offers on premium have been received on the sale of government shares in any entity. This reflects the investors confidence in economic policies of the Prime Minister Muhammad Nawaz Sharif”, said Muhammad Zubair Minister of State for Privatization Commission while addressing a press conference on Saturday. He informed that this was the largest ever book building in the Capital Market, which Pakistan has undertaken and it has been completed in a successful manner.

Terming it an unprecedented and unbelievable privatization development, the State Minister informed that strike price of the PPL shares was Rs 219 per share against the floor price of 205 per share. Therefore, the revenue generated from the PPL deal enhanced to Rs 15.3 billion against expectations of Rs 14.3 billion because of hike in shares price, he added.

Muhammad Zubair said that government has received more than double demand i.e. 143 million shares against the plan of 70 million. He informed that government has received Rs30 billion in subscriptions from local institutions and high net worth individuals (HNWI).

He informed that government has held the capital market transaction of two entities United Bank Limited and Pakistan Petroleum Limited in last 15 days. “The PPL’s shares transaction took place in difficult time due to the country’s environment, like Lahore incident, Dr Tahir-ul-Qadri’s return to Pakistan and others”, said the Minister and added that government has refused to postpone the transaction of PPL as this would have sent negative message to the investors that country’s situation is deteriorating.

Talking about transparency, Zubair said, “We will do everything 100 per cent in transparent way”. He termed the privatization plan for next financial year 2014-2015 a ‘most ambitious’ plan that would generate Rs 198 billion for the national kitty. The government would make capital market transaction and strategic partnership of public sector entities next fiscal year that included difficult process of privatization of Pakistan International Airlines (PIA), he added.

Sharing future privatization plan, the State Minister said that privatization commission’s board in its next meeting would finalize the list of power generating and distribution companies, which are bleeding massively. The main focus of the government would be to privatize the power companies to control the losses of power sector, he added.

“Pakistan needs cash today, desperately for investment”, he said and added that money generated from privatization would be put for effective use. On a question about pending Etisalat amount, the Minister said that Etisalat management would come to Pakistan in near future for final settlement on the long-lasting issue.

The individuals have took keen interest in the transaction as 24 per cent shares were bought by them while foreign investors bought 9 per cent shares, the state minister remarked. To another question, the State Minister said that the government plans to float shares of Oil and Gas Development Authority (OGDCL) in September this year.

Meanwhile, Prime Minister Muhammad Nawaz Sharif has congratulated Privatization Commission of Pakistan on the successful conclusion of Pakistan Petroleum Limited (PPL) capital market transaction. Prime Minister has said that the transaction has been a mega success, far better than any such transaction in our capital market history and it has broken all previous records. “I am happy that for the first time in our history, Government has been able to sell the shares at a premium (higher than the market price)”, added the Prime Minister.

PM said that it is the faith and trust of investors in our economy that government received more than 143 million shares (Rs 30 billion) bids as against offering of 70 million shares (Rs. 14.3 billion) which is more than double the amount. Prime Minister further said that all of this reflects the confidence of the investors, both domestic and foreign, in the sound economic policies of our government and their strong belief that in due time, Pakistan will achieve sustainable long-term economic stability.

Meanwhile, Finance Minister Senator Ishaq Dar also welcomed the Pakistan Petroleum Limited (PPL)’s transaction. “The transaction of PPL shares will send a strong message to both international and domestic investors on the state of economy and the investment opportunities in Pakistan. He said that investors confidence in the economic polices of the government has been reflected in both bond and equity market”, the Finance Minister said in a statement. “We need to capitalize on the momentum and continue on the reform agenda undertaken by the government”. He appreciated the hard work done by the PC and the whole team for completing the transaction in a professional manner. He added that due process would not be compromised while putting in place credible plans for divestment of shares.

Earlier, the Cabinet Committee on Privatization (CCoP), which met under the chair of Minister for Science and Technology, Zahid Hamid, approved the Strike Price of Rs 219 per share and allocation of shares to the successful bidders as specified in the Offer for Sale Document (OFSD) on the recommendation of the PC Board.

The Minister of State for Privatization, Muhammad Zubair, in a detailed briefing, explained that the transaction structure of Pakistan Petroleum Limited (PPL) offered 70 million shares to international and domestic institutional investors and High Net Worth individuals (HNWI). The CCoP was informed that at the floor price of Rs. 205 per share total orders of Rs. 29.33 billion (143 million) have been received i.e. a coverage of 2.04x the offer size at the ‘floor price’.

CCoP was further informed that at the strike price of Rs. 219 per share, total orders of Rs 15.98 billion (73 million) shares have been received, i.e. a coverage of 1.04x the offer size at the strike price. The Minister of State for Privatization further informed that this was the largest ever book building in the Capital Market which Pakistan has undertaken and it has been completed in a successful manner.

It may be mentioned that the Book Building process for the offer of GOP shares in PPL transaction was scheduled to start at 9 am PST June 25th 2014 and concluded at 5:00 pm PST on Friday June 27, 2014. The ‘Strike price’, i.e. price of PPL share was determined/ discovered on the basis of Book Building through the Dutch Auction Method.

The transaction marketing road shows were held in Karachi, Lahore, Islamabad, Sialkot and Faisalabad from June 19, 2014 to June 23, 2014.